MOTORISTS in NSW are spending up to $85 million more on petrol due to the state government’s push to force service stations to sell ethanol-laced fuel, according to the competition watchdog.

In its latest petrol market report, the Australian Competition and Consumer Commission says the NSW Government’s ethanol mandate has led to less choice and higher costs for Sydney motorists.

Introduced in 2007, the ethanol mandate requires service stations to sell at least 6 per cent ethanol as a proportion of their sales. E10 fuel is a mixture of 10 per cent ethanol and 90 per cent petrol.

Earlier this year, the Baird government ramped up its ethanol push by introducing harsh new penalties of more than $500,000 for service stations that do not stock E10 fuel. Manildra Group, the monopoly provider of ethanol fuel in NSW, is a major donor to state and federal branches of the Liberals, Nationals and Labor.

Former NSW Upper House whip Peter Phelps, who quit in March out of protest against the ethanol fuel laws, told the ABC earlier this year that it was “literally the worst piece of legislation NSW has introduced”.

According to the ACCC, the reduced availability of regular unleaded petrol (RULP) has led to higher sales of premium unleaded petrol (PULP) and E10. In 2014-15, PULP made up 54 per cent of total petrol sales while E10 made up 36 per cent. Nationwide excluding NSW, PULP sales were 23 per cent and E10 just 4 per cent.

The ACCC calculates that as a result of the ethanol mandate, Sydney motorists have spent between $75-$85 million extra on PULP, which averaged 11.5 cents per litre more expensive for 95 octane and 18.5 cents per litre for 98 octane than RULP in 2015-16.

“While the use of E10 may be better for the environment, the ethanol mandate has reduced consumer choice and cost Sydney motorists up to $85 million,” said ACCC chairman Rod Sims. “It has also boosted Sydney retailer’s profits due to the higher margins on premium fuel.”

Mark McKenzie, chief executive of the petrol retailer peak body ACAPMA, said government interference in motorists’ choice of fuel was unwanted and created “perverse economic effects”.

“Simply put, people are making a choice as to what product they put in their car and really are thumbing their nose at the government,” he said. “We’re talking about a mandate that’s been around for seven years. People have tried E10 and have fled from it.

“The issue here is the arrogance of the Baird government. They think they can make policy to suit themselves and their mates, when there is a broader community they’re supposed to be serving.

“Our view is the choice of fuel is that of the motorist and the government has no place interfering in a core product.”

NRMA spokesman Peter Khoury said while it was true people were buying more premium fuel, there had been a lot of “misinformation” about E10 and it was “demonstrably not true” that it was bad for engines.

“The majors are advertising premium fuels quite heavily. People can buy regular fuel or E10 but they’re buying 98 octane and paying upwards of 30 cents per litre more for no real benefit,” he said.

“About three-quarters of the NSW fleet can run on E10. The remaining that can’t are either cars built before 1986 or they are high-performance vehicles that are mostly imported. The manufacturer will specify if a vehicle must run on premium fuel.”

Mr Khoury also disagreed with the ACCC’s finding that regular fuel was harder to find. “There is plenty of regular out there,” he said. “When we quote petrol prices we’re talking regular, not E10. People are buying it all over the place.”

Queensland is set to become the second state to introduce an ethanol mandate from January. Queensland Biofuels Minister Mark Bailey told The Australian many NSW motorists “wrongly assumed” their car could not use E10 because the NSW government did not roll out a consumer education campaign.

“Our ethanol mandate from January is set at a level that will ensure fuel retailers continue to offer a broad range of fuel grades,” Mr Bailey said.

NSW Minister for Innovation and Better Regulation Victor Dominello said the ethanol mandate had been a bipartisan policy since 2007.

“The government made changes to the legislation earlier in the year that will boost competition in the marketplace and provide consumers with greater choice,” Mr Dominello said.

“The reforms ensure the mandate is focused on the bigger petrol station operators while providing appropriate exemptions for smaller operators.

“Consumers are encouraged to use the government’s FuelCheck website which empowers them to find the cheapest fuel by publishing petrol prices in real-time for every service station across NSW.”